Seyfarth Synopsis: Although it is not law yet, according to the must-pass spending legislation passed by both the House and Senate, it looks like the infamous Cadillac Tax and the Annual Fee on Health Insurance Providers (HIP Fee) will both be repealed for good. Absent any unforeseen circumstances, the President is expected to sign it into law before the December 20th deadline in order to prevent another government shutdown.

The Trump administration has been busy chipping away at the Affordable Care Act (ACA), and it looks like they show no signs of slowing down. Congress has already repealed the individual mandate – a tax on those who don’t have health insurance. Now a permanent repeal of the Cadillac Tax and HIP Fee is materializing as well.

Cadillac Tax

The so-called “Cadillac Tax,” a 40% excise tax on high-cost employer-sponsored health plans, will be repealed once and for all. The burden of the tax was to fall on employers as a way to get them to reduce excess health care spending. The tax was not very popular from the start. Thus, although the Cadillac Tax was originally scheduled to be effective for taxable years beginning after 2017, it never took effect; the effective date was continually pushed back due to all of the opposition it received from unions, employers, insurers and others.

Annual Fee on Health Insurance Providers

The ACA imposed an annual fee on health insurance providers that was ultimately passed through to consumers. Originally effective for 2014, there was a moratorium on the HIP Fee for 2017 and 2019, but it applied for 2018 and will apply again for 2020. According to the House and Senate bills, the annual HIP Fee will be permanently repealed effective 2021. The HIP Fee will not be repealed for 2020 as lawmakers feel that most plans have already gone through the process of factoring in that cost for the next year, and repealing the fee would create compliance costs and issues.

Although the legislation is not yet law, we’ll know very shortly whether or not these taxes will be repealed. So stay tuned….